'You can't spend the charter school funds for anything you want...' Charter school operators guilty of misusing funds... The couple running Ivy Academia could face prison time over the $200,000 in public funds. The case is seen as having major implications for other charters.

George N. Schmidt - April 06, 2013

[The following article appeared in the Los Angeles Times on April 5, 2013. The photo with the article -- Yevgeny “Eugene” Selivanov reacts to the guilty verdict. He faces a maximum prison sentence of about 19 years. (Irfan Khan / Los Angeles Times / April 5, 2013].

L.A. charter school aims to toss out students with fake addresses, By Howard Blume, Los Angeles Times April 5, 2013, 11:24 p.m.

In a case that could have impact statewide, a Los Angeles jury Friday found the operators of a west San Fernando Valley charter school guilty of illegally taking or misappropriating more than $200,000 in public funds.

Together, Yevgeny "Eugene" Selivanov, 40, and his wife, Tatyana Berkovich, 36, faced 26 felony counts for using state money in ways they insisted were legal under laws that apply to nonprofits and charter schools in California. Over several years, for example, they spent more than $34,000 on meals, entertainment and gifts that they classified as business expenses or gestures of appreciation for teachers.

Charter advocates followed the case closely because it could expose other operators to prosecution and, because, they said, it could undermine the flexibility that is benefiting more than 410,000 California students now enrolled in those campuses. For charter critics, the result is a long overdue rebuke of an anything-goes mentality that they contend sometimes abuses the public trust and drains resources from students.

"This message is going to resonate throughout the charter school community," said prosecutor Sandi Roth. "You can't spend the charter school funds for anything you want. It has to be money spent on the kids and the schools."

Charters are independently managed, publicly funded and exempt from some rules that apply to traditional schools.

Defense attorneys argued that a charter school — California has nearly 1,000 — should be treated as nonprofits, which have flexibility in spending money, provided it furthers the mission of the organization.

"This case will have huge impact on charter schools," said Roger Lowenstein, who runs the L.A. Leadership Academy charter. "Now we are threatened with jail if we give a teacher a Christmas bonus of a $50 Target card, as we do."

Selivanov and Berkovich started Ivy Academia, a charter school of 1,100 students that operates on three campuses, in 2004 and remained in charge until their arrests in 2010. The school had strong test scores, financial stability and a waiting list of applicants.

Such success was what mattered most, argued witnesses for the defense. Indeed, in creating charters, the idea was to trade flexibility for academic accountability.

"The prosecution seeks to undermine the cornerstone of what makes charter schools successful — their freedom from the rules binding traditional district schools," said attorney Anne A. Lee, in a brief on behalf of the California Charter Schools Assn.

The monthlong trial drew heavy hitters from the charter community as witnesses, including Lowenstein; former L.A. school board president Caprice Young, who headed the California Charter Schools Assn.; and charter pioneer Eric Premack, executive director of the Charter Schools Development Center in Sacramento.

After more than a week of deliberation, jurors found the couple guilty of misappropriation of public funds, embezzlement and filing false tax returns. Selivanov, who had a greater role in managing finances, also was convicted of false accounting and money laundering. He faces a maximum sentence of about 19 years and Berkovich about 71/2 , prosecutors said.

Expenses classified as "teacher appreciation" activities included occasional holiday or bowling parties, a few involving alcohol purchases. There also were gift cards and baby gifts.

The pair also bought ads to promote the school, made charitable contributions and joined organizations with school funds. This money also paid for flowers for key local figures, including then-City Councilman Jack Weiss and school board president Monica Garcia, documents showed.

After the trial, one juror noted that some expenses "seemed more overtly personal."

These included $12.99 for Speedo swimwear. There also was a $995 seminar on how to limit your personal tax bill.

"Mistakes were made," said defense attorney Nina Marino. "Mistakes are not a crime. Mistakes are mistakes."

Some charges centered on the lease for the main campus on De Soto Avenue in Woodland Hills. In 2004, the couple negotiated a 10-year lease for $18,390 a month. But three years later, they began charging the school $43,870 a month for a sublease. At the same time, Selivanov and Berkovich took on responsibility for a $520,000 bank loan to the school.

The prosecution characterized the deal as a moneymaking scheme.

"They had a fiduciary duty to keep the rent as low as possible," said Roth.

The defendants' annual salaries rose as high as $160,000 apiece, compensation which was approved by the school's board, as was the lease.

The two directors emphasized the teaching of entrepreneurial skills, and they were known to push the envelope with their own practices, such as concurrently running a fee-charging preschool. They also joined a few other charters in suing the L.A. Unified School District for better access to district facilities.

The prosecution grew out of an investigation by the district's inspector general.

In a recent interview, Berkovich, who still has a child at the school, said she's concerned that it has declined in the couple's absence.

"Both Eugene and I put our heart and soul into Ivy," she said.

howard.blume@latimes.com

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